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Poland is gradually changing its approach regarding the concept of fixed establishment for VAT purposes.
Polish tax authorities and courts are taking an expanding approach regarding those activities of foreign companies which give rise to a fixed establishment.
As a general rule, a ‘fixed- establishment’ shall be any establishment characterised by a sufficient degree of permanence and a suitable structure in terms of human and technical resources to enable a company to provide the services or goods supplied as part of its activity.
However, Polish Tax Authorities in connection with Welmory Sp z.o.o.’ case (C-605/12) of the ECJ, have extended this concept declaring that the resources do not need to belong to the company, so that a fixed establishment may be also created by using third party’s resources.
To know if a company has a fixed-establishment the following questions must be taken into account:
In case that the answer to any of them is yes, then you could have a fixed-establishment.
Having a fixed-establishment may deviate the VAT treatment of your transactions in Poland. For certain suppliers, reverse charge sales would not apply. In case the authorities consider that VAT should have been charged due to a fixed establishment in Poland, they would assess penalties in the amounts not paid to the tax authorities.
Furthermore, in case the concept is extended to permanent establishment for corporate tax purposes, the foreign company would be subject to Polish corporate tax on the revenue connected to their activity in Poland.
This information has been provided by our local partner in Poland.